This guide contains everything you need to know about freight shipping and logistics so you can make informed decisions for your business. Learn the difference between LTL vs FTL, how to find the best rates, and what services to expect from a freight provider.
Freight shipping is an essential part of any merchant’s supply chain. Several years of supply chain disruptions have made freight shipping a top concern for most small to mid-sized businesses (SMBs).
According to a recent merchant survey, 80% of merchants’ supply chain costs have increased, and 42% reporting increased freight shipping rates as the primary cost driver.
If you’re looking to build a more efficient supply chain to offset increased freight costs, this guide is for you. It contains everything you need to know about freight shipping to make more informed decisions for your business. Learn the difference between LTL and FTL, how to find the best rates, and what services to expect from a freight provider.
What is Freight Shipping?
Freight shipping refers to the movement of large or heavy shipments by truck (otherwise known as over-the-road, or OTR, shipping), rail, air, or ocean. Freight is primarily how merchants and retailers ship their products into storage facilities, fulfillment centers, and retail stores.
To qualify as freight, a shipment must weigh over 150 pounds or measure more than 30 in x 30 in x 30 in. Anything smaller will most likely be sent as a small parcel shipment for the best shipping rates.
eCommerce merchants shipping large products like exercise equipment or furniture have the unique challenge of finding a vendor that can make residential freight shipments. These large home deliveries increasingly come with an expectation for threshold or white glove delivery.
The pandemic changed the ways consumers shop. Not only are they doing more of their shopping online, they have changed the types of things they purchase online. In a recent consumer survey, 30% of consumers reported that they are more likely to buy furniture online vs. in-store, and 57% reported that in-home delivery is an important service offering for large home deliveries.
Types of Freight Shipping
Freight shipments typically fall into one of five main categories:
Full Truckload (FTL)
Less than Truckload (LTL)
FTL freight stands for Full Truckload freight; it is also known as TL (Truckload) or OTR (over-the-road). It is a method of freight shipping that uses a 53’ semi-truck to transport products on surface roads. These shipments can cross state or country borders, and each truck can typically carry a maximum of 26 pallets.
A shipment is classified as FTL if the entire truck is filled with products from the same shipper – the shipment does not necessarily have to take up the “full truck”. FTLshipments have one dedicated driver and stay on the same truck until they arrive at their final destination.
LTL (or Less Than Truckload) is also transported on a 53’ semi-truck, but with shipments from multiple shippers on the same truck. This means that the price of the shipment is shared across multiple shippers, but it also means that the driver’s time and resources are split among them as well.
LTL shipping networks are complex and require multiple touchpoints. This means there are more opportunities for shipments to be lost or damaged as they are transferred between trucks.
LTL and FTL are the most common types of domestic freight shipments, and it can be difficult to determine which method is the best option. The chart below outlines the basic differences between LTL and FTL freight shipping. For a full breakdown of the differences, with tips and recommendations, see our complete guide to LTL vs FTL.
Ocean Freight is the most common method for transporting products internationally. Most merchants in the United States manufacture their products overseas, and ocean freight is the most economical method to transport it to the US.
Prior to pandemic-induced supply chain disruptions, it typically took around 40 days to ship a container from China to the US. Since 2020, the market has been volatile. Unexpected shutdowns and port congestion make it hard to estimate how long an ocean freight shipment will take. For this reason, demand forecasting has become more important than ever to reduce freight shipping costs without risking stockouts or missed sales opportunities.
Air Freight is in much higher demand since 2020 supply chain disruptions, which caused ocean freight rates to increase and transit times to increase. While passenger air travel was down, air freight rates became more competitive with ocean freight. However, air freight rates are hard to predict and have a significantly higher carbon footprint than ocean freight.
Freight Shipping Rates
Between high demand and a shortage of truck drivers, freight shipping rates have made their way even into mainstream media. Fluctuating diesel prices and ongoing supply chain volatility continue to make freight shipping costs difficult to predict, but understanding what factors affect those rates will help you make better decisions for your business.
Over the Road (OTR) Freight Shipping Rates
OTR freight shipping rates are spot rates – meaning they can change dramatically based on the current market demand. Changes in the market and price fluctuations can literally happen overnight, and rates are not locked in until a pickup is scheduled.
LTL pricing is determined primarily by the product’s freight class. Freight class is a numerical classification set by The National Motor Freight Traffic Association (NMFTA) which rates product types from 50 (the least expensive) to 500 (the most expensive). Shipments are categorized according to:
LTL freight rates are also affected by fuel surcharges. Fuel surcharges are set by The U.S. Department of Energy every Monday. The average price sets the standard for all freight shippers in the country.
Knowing your product’s freight class is an important part of getting an accurate LTL freight rate but can often be a difficult undertaking. Freight class is determined by product type, density, ease of handling, and more. For an in-depth look at freight class and helpful tips for LTL shippers, check out Coyote Logistics’ guide to LTL freight class.
FTL rates are simpler to calculate because they do not take freight class or product type into account. If the shipment can be covered by standard insurance and weighs less than 45,000 pounds, the product type does not affect the rate.
FTL rates can either be quoted as a price per mile or a flat door to door rate. While freight class does not affect FTL pricing, there are several variables that can cause prices to fluctuate, including:
Seasonality: the holiday peak season and produce seasons tend to be more expensive times to ship freight
Mileage and trucking lane: Total distance traveled does play a part in FTL rates, but shipping from one high-demand city to another will cost more per mile due to capacity constraints.
Timing/Urgency: If you have flexibility on your pickup and delivery dates, you can usually find a lower rate.
Pickup and dropoff location: Ease of access, scheduling, and equipment availability at the pickup and dropoff locations will affect FTL rates. Basically, the more difficult the locations are to access, the higher the rate will be.
Contract vs spot rates: Scheduling out and contracting regular FTL shipments gives carriers predictability, which is highly attractive and will often result in lower rates. Scheduling shipments last-minute will typically result in higher rates.
International freight shipping is any freight shipment that crosses an international border. For US merchants, that can mean importing goods from as far away as China or as near as Mexico. Regardless of the distance traveled, international freight shipping has some additional considerations to domestic freight shipping, including:
Clearing customs (both export and import)
Freight Brokers vs. Freight Forwarders
Freight brokers and freight forwarders are sometimes referred to as “middle men,” but a partnership with a well-resourced freight broker or freight forwarder can ease a lot of operational burden, especially for small to mid-sized businesses (SMBs).
At their core, freight brokers and freight forwarders both act as an intermediary between shippers and carriers. They negotiate rates, schedule pickups and deliveries, track the shipment on its journey, notify shippers of changes or delays in their shipments, and more.
Some freight brokers can also act as freight forwarders or even carriers, but there are some key differences between their functions.
What Is a Freight Broker?
A freight broker facilitates communication between a shipper and a freight carrier. They never actually take possession of the shipment. They simply manage the process with the actual carrier. They are asset-light, meaning they don’t actually own or operate any of the trucks or hire the drivers. They are usually technology-based solutions with a deep portfolio of reliable shippers to call on, enabling them to provide competitive rates, even when capacity is tight.
What Is a Freight Forwarder?
Freight forwarders also arrange freight transportation with third-party carriers. However, freight forwarders do actually take possession of the cargo to store, package, and consolidate it when necessary. Unlike freight brokers, freight forwarders can work across international borders for ground, ocean, ocean, or air freight shipments.
Because freight forwarders take possession of the products, often storing them in their own warehouses, they assume a greater liability than freight brokers do. They also package and can often consolidate shipments to negotiate better rates.
How to Find a Freight Shipping Provider
Ultimately, the same qualities that make a great freight provider also make a great warehousing, fulfillment, and delivery partner. In fact, segmenting your supply chain solutions among multiple partners can make internal processes unwieldy and inefficient. Streamlining your end-to-end supply chain through a single partner gives you greater control over your business.
An end-to-end supply chain solution will have a consolidated technology platform so you can track your inventory from the manufacturer to your end customer through one access point. You will also have one point of contact for questions or issues you may encounter along the way. This kind of partnership can simplify day-to-day operations, giving you back time and resources to invest back into other areas of your business.
Having a single provider will also give you visibility into your supply chain to more easily identify opportunities for greater efficiencies or cost savings. Your data is aggregated in a single platform and reporting system so that it tells more compelling stories about the effect your supply chain has on the entirety of your business.
Freight shipping costs are determined by a variety of factors. LTL rates change quickly and often based on capacity (known as a spot market). LTL rates are determined primarily by freight class. FTL costs are often determined by cost per mile traveled. FTL rate quotes are more reliable, but will be more expensive than LTL rates on average.
How long does freight shipping take?
Due to the complex nature of LTL networks, LTL shipments will take longer than FTL shipments and do not have scheduled delivery time. FTL shipments take a direct route from their origin to destination. Their delivery times can be limited by weather, traffic, and the number of hours the driver is legally allowed to drive at a time.
What is a freight handler?
Freight handlers do the heavy lifting of loading, unloading, packing, labeling, and consolidating freight along different steps of its journey. They are responsible for keeping records and ensuring the safety of goods as they travel through a freight network.
What is a freight dispatcher?
A freight dispatcher works on a freight carrier’s team to communicate with freight brokers and help drivers schedule their loads. They are essential for effectively managing shipments and ensuring on-time delivery.
What is multi modal freight shipping?
Multimodal refers to different modes of transport along the same cargo route or within the same network. For example, a multimodal network may include ocean, air, rail, and over-the-road transportation.